TECUMSEH — What began with an optimistic budget for fiscal year 2020-2021 was derailed in recent weeks as the budget the Tecumseh City Council will vote on at its meeting Monday has been forced to undergo cuts due to declining revenue expectations from the coronavirus pandemic.
The meeting, which will be held at Tecumseh City Hall, beginning 7:30 p.m. and be accessible remotely through GoToMeeting, will include a public hearing starting 7:35 p.m.
According to the budget presented April 20 by city manager Dan Swallow, city expenditures are expected to be $6,112,192 — a 3.1% drop from fiscal year 2019-2020. Despite growth in some revenues, the city expects total revenue $5,603,786, leaving around $508,406 to be made up by dipping into the city’s fund balance.
If approved by the council, it will go into effect July 1.
Swallow said that the council understands that the quickly changing situation would likely require amendments to the budget as the year progresses.
“They understand it’s a moving target,” Swallow said in a phone interview Thursday.
The problem has many sources, but is the direct result of the multiple closures and reductions in economic activity from the pandemic.
“There's a lot of uncertainty right now because we've not seen any projections from the state of Michigan on sales tax revenues. Obviously, we know that they're going to be significantly down, particularly for the current fiscal year, but also likely a downturn in the next fiscal year. So we are going to have to probably make amendments throughout the next fiscal year to adjust to those new revenues,” Swallow said. “We're also looking longer term. Even though our property values that are the basis for property tax bills are currently set, they're set at the end of the calendar year. We are anticipating longer term that we'll see potential reductions particularly in the commercial property values, which could impact property taxes as well.”
Other city services facing significant revenue loss include the Tecumseh Center for the Arts (TCA), which had to cancel headlining shows as well as rentals because no large groups are allowed to congregate — something which is essentially all of a theater’s business.
With no ticket sales or rental revenue, the theater was forced to raise money from community members to make up its losses for April and will likely also require additional funding from the city.
While Gov. Gretchen Whitmer allowed construction trades to resume working Friday, the building and trades permits in the Building Department are expected to be down. Despite construction restarting, Swallow predicts it to be slower as companies and individuals won’t have as many financial resources as before the pandemic.
Water and sewer revenues are expected to decline down the road, as so many large businesses in Tecumseh have shut their doors or reduced staffing. The low staffing, Swallow expects, will last for some time.
“What we're seeing is we have some larger commercial and industrial customers that are currently shut down. And so we're not anticipating those will be fully restored through the next fiscal year, so we're trying to budget conservatively,” he said.
The Parks and Recreation Department has had to cancel its programs from which it makes its revenue from participant fees.
With so few workers commuting, gas tax revenues collected by the state and distributed to municipalities to pay for street work has also fallen off.
In reaction to the anticipated changes, revenue cuts were incorporated into the budget, including 20% cuts in building and trade permit revenues and TCA revenues. Water, sewer and gas tax revenue projections were cut by 10%.
Swallow said that every city is being effected similarly and that it has been a topic of discussion among members of the Michigan city manager’s association, as well as something being discussed between the state and Michigan Municipal League.
The crisis comes at a time when many cities, including Tecumseh, have seen their revenues finally reach the same number as revenues were prior to the Great Recession, but not yet the same point if you factor in inflation.
“So, but we were just getting — in terms of raw dollars, or true dollars — we're just getting back to pre-recession levels. And so now this will drop us back below those levels again. Initially, we were looking at larger capital projects, some capital improvements to our city facilities and parks … . Again, the TCA, we were looking at some capital projects there,” Swallow said. “Unfortunately, some of those projects will have to be shelved while we see what happens with the revenues and obviously, we have less flexibility in what we can do to provide service with fewer financial resources to potentially implement new programs or make some changes. That's obviously much more constrained at this point.”
Instructions on how to access and participate in the public hearing during the council’s meeting can be found at the top of the meeting’s agenda on the city’s website.
A full version of the presented budget can also be found on the website, www.mytecumseh.org.